Health Care Guide: Take 5 with Rich Yurkowitz

Rich Yurkowitz is a senior actuary with the Milwaukee office of Aon Hewitt, Chicago. He answered questions from The Business Journal on health insurance costs for the next several years and the business impact of the implementation of the Affordable Care Act.

Q: Your company is estimating lower health insurance price increases in 2012 for large employers. What is driving that?

A: “According to our analysis, in 2012, U.S. companies and their employees are seeing the lowest health care premium rate increases in six years. The average health care premium rate increase for large U.S. employers in 2012 was 4.9 percent, down from 8.5 percent in 2011 and 6.2 percent in 2010. There are multiple factors that contributed to the lower rate of increase. In 2010, employers found themselves in a challenging budgetary position, thus taking more aggressive actions with their benefit plans. An expected decline in employment levels and new costs resulting from health care reform had to be factored into expected costs, which led many employers and insurers to conservatively project their health care premiums for 2011.

“As actual results materialized, employers have seen some stabilization in employment levels, less severe impact of high cost claims, a general movement toward consumer-driven plans and greater clarity around the average cost impact associated with health care reform. As a result, 2012 premiums were offset to reflect the better-than-expected historical experience. For 2013, we expect premium increases to gravitate back to the 6 percent range.”

Q: What role will the Affordable Care Act play in prices employers pay for insurance in 2012 and 2013?

A: “The Affordable Care Act (ACA) has definitely had an impact on insurance prices. For 2012 and 2013, the ACA changes are relatively modest and identifiable. Changes in 2012 were more administrative in nature and 2013 will bring some new fees and taxes. Employers and employees will see improvements in 2013 preventive health coverage (depending on current plan design) and will begin to learn which states will expand Medicaid coverage and the potential for plan offerings in the state and federal exchanges. We know that Wisconsin has deferred the option to set up a state-based exchange, so the federal government will implement one in this state.”

Q: What is the most misunderstood aspect of the Affordable Care Act?

A: “While not a misunderstanding, employers and employees are wondering how the new state and federal exchanges will work in 2014. A major purpose of the ACA is to provide coverage to the uninsured. Part of that solution is the expansion of Medicaid. In recently released FAQs on exchanges, the U.S. Department of Health and Human Services announced that a state cannot expand its definition to less than 133 percent of the federal poverty level and still receive 100 percent of federal matching funds. Currently, Wisconsin will not expand its definition for Medicaid eligibility, nor will about half of all states. Another part of the solution is the advent of the state and federal exchanges and premium tax credits or cost sharing reductions available to certain individuals with household income of up to 400 percent of the federal poverty level.

“At this time, most employees do not know what choices they’ll have and what the relative costs, net of any applicable subsidies, may be. Employers also may decide to either continue or discontinue their employer medical plan, so employees may not know what even their employer coverage will look like.”

Q: What are the top two points employers should consider when deciding whether to drop coverage and send employees to health benefits exchanges?

“One factor employers should consider is the financial implications. Employers who employ on average at least 50 full-time employees need to determine whether eliminating coverage and risking liability for the shared responsibility penalty is more cost effective than continuing to provide coverage. For large employers, a cost-benefit analysis would show the relative comparison of options in which to make an informed decision based on today’s regulations. For many small employers, the administrative effort to continue coverage in 2014 may be relatively more ‘costly’ than exiting employer-sponsored health care and letting employees get coverage through the state and federal exchanges.

“Another factor employers should consider is the administrative implications. Employers that are considering exiting employer-sponsored health care need to be comfortable with giving up some control on managing plan design and insurance carrier relationships. They will no longer own these decisions, and they will be spending less time on plan and insurance carrier management. However, that enables them to focus more time and energy on improving the health of the employee population or other core business needs.”

Q: Aon Hewitt is marketing a new private health exchange in metro Milwaukee. How will this product compete with new accountable care organizations from Aurora/Blue Cross and Aurora/Anthem?

“The Aon Hewitt Corporate Exchange is a multi-carrier, multi-employer national exchange targeted at large employers with more than 5,000 employees. In the Aon Hewitt exchange, each participating insurer can decide which network of providers it wants to offer to exchange employers and their employees. We expect that some insurers will offer ACOs in some geographies through our exchange as their local network solution for a lower price point, and others will offer their larger network to appeal to more customers. The exchange vehicle promotes innovation and new product development as it provides price competition on a consumer level. The Aon Hewitt exchange does not compete with ACOs. Rather, the Aon Hewitt exchange is a ‘marketplace’ which offers ACOs who are willing to partner with participating insurance companies, a distribution channel for their solutions.”